Inspections and emissions in India : puzzling survey evidence about industrial pollution

Industrial plants face pressure to abate water pollution from many sources, national and local, through formal government regulation and through more informal pressure from consumer groups and concern for the firm's reputation. Formal regulation tends to reflect the bargaining power of local communities and is not as uniform or blind as the law would imply. Regulators are not immune to the pulls and pushes of powerful community interests. Studies of enforcement in the U.S. steel industry, for example, find that it is weaker at plants that are major employers in the local labor market. Using survey data from India, the authors examine whether themonitoring and enforcement efforts of provincial pollution control authorities are affected by local community characteristics (which serve as proxies for political power). They also test for evidence that informal pressure on plants results in negotiated reductions in emissions. They find that high levels of pollution in India elicit a formal regulatory response: inspections. But inspections are ineffective in bringing about changes in behavior, probably because of bureaucratic or other problems in follow-through. Moreover, poorly-paid inspectors with low morale may be susceptible to"rent-seeking."They find little evidence to support the hypothesis that better-educated and higher-income communities are better able to pressure plants to reduce emissions than are poorer communities, although there are significantly more inspections in more developed districts. In India, whatever community pressure exists is probably channeled through formal regulatory mechanisms. Larger plants in India, as in the rest of the world, tend to be"cleaner"than smaller plants. Indian policymakers and regulators may want to explicitly recognize the tradeoff in environmental quality of the existing regulatory bias toward the small- and medium-scale sector.